Analysis: VW in delicate dance with German union over Tennessee plant

DETROIT Volkswagen AG (VOWG_p.DE) officials in Germany and the United States are performing a delicate dance with VW's influential German union as they wrestle with the possible representation of workers at the company's plant in Tennessee.

Volkswagen is trying to introduce its model of a German-style works council, which would help set work rules for white- and blue-collar workers, at its only U.S. plant, in Chattanooga.

While Volkswagen has works councils at all of its plants outside of China and Tennessee, it faces challenges in forming one in Chattanooga for various reasons, including a split within the company over whether to support the United Auto Workers union.

IG Metall, the German union with seats and influence in VW's boardroom, is pressing the company to establish a works council at Chattanooga. IG Metall also supports the UAW's bid to organize the U.S. plant.

It is IG Metall's influence and the company's need to keep labor peace in Germany that has Volkswagen's U.S. officials careful not to misstep. At the same time, they also are trying to maintain good relations with Tennessee's politicians, led by anti-UAW Governor Bill Haslam and U.S. Senator Bob Corker, both Republicans.

In China, VW plants are jointly owned with Chinese partners, making the Chattanooga plant, opened in 2011, the company's only wholly owned plant without a works council.

Volkswagen cannot institute just a works council in Tennessee because U.S. labor law does not allow for company-sponsored unions. In order to set up a works council for the 1,570 hourly paid manufacturing workers at Chattanooga, a U.S. union needs to be involved, because a foreign-based union cannot represent U.S. workers.

A works council at Chattanooga would act largely as it would in Germany and not negotiate wages and benefits.

While Jonathan Browning, VW's top U.S. executive, said last week that the company is in favor of establishing a German-style works council at the plant, he stopped well short of showing any support for the UAW.

"Our strong desire is to have a works council present in Chattanooga," Browning, Volkswagen Group of America's president and CEO, said in an interview at the Los Angeles Auto Show. "The challenge in a U.S. context is how to bring that into being."

Ultimately, VW's management board will decide whether to allow a works council at Chattanooga working with the UAW or another U.S. labor union. Browning last week said it was up to the Chattanooga workers to vote on union representation.

By saying he supports the concept of a works council, Browning can toe the official company line. By noting that union representation is up to the workers, he sidesteps the issue of public support or opposition to the UAW.

A successful push by the UAW at the plant would be significant for the union and for organized labor in the United States, where union membership fell to 11.3 percent of the work force in 2012, the lowest percentage in 76 years.

The plant opened a little more than two years ago in the heart of the largely anti-union U.S. South. Since then, the UAW has worked to organize workers there as part of a long-running -- and largely unsuccessful -- effort to bring foreign-owned auto plants into its fold.

While VW officials have officially denied it, there is a widely held belief by IG Metall leaders and the UAW that Volkswagen placed the plant in Tennessee in order to keep the UAW out.

The new IG Metall leader, Detlef Wetzel, earlier this month warned VW about trying to avoid unions in anti-union Tennessee.

"Low wages and union-free areas: That's not a business model that the IG Metall would support," Wetzel told Reuters in an interview.

Insiders say that VW prides itself on knowing how to manage labor relations and needs no help from outsiders, including Tennessee politicians.

The UAW says it has collected the required signatures on union endorsement cards from Chattanooga workers and has asked VW to install the union without a vote. But VW has declined.

There is also substantial resistance to the union, as shown by the 611 signatures gathered by anti-UAW employees at the plant.

By deliberately locating the plant in Tennessee, Volkswagen itself choreographed its current dilemma, said Gary Chaison, industrial relations professor at Clark University in Massachusetts.

"They felt putting the plant in the U.S. South would isolate them, and have it so they would not have to deal with a union," he said. "They forgot that they cannot separate what happens in Tennessee with what happens in Germany."

WASHINGTON, U.S. wholesale inventories fell as previously reported in October amid a surge in sales, supporting views that inventory investment would provide a modest boost to economic growth in the fourth quarter.

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